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Call for joint annuities to be default

Partnership is urging Government ministers to look at making joint life annuities the default option for married couples.

Any person who fails to make an active decision on their retirement income receives a single-life annuity product from their provider.

Partnership chief executive Steve Groves (pictured) says: “The Treasury should look at default retirement products. If you are married, a joint-life annuity is more likely to be suitable, so that is something that needs to be looked at.”

The proposal could form part of a menu of policy options due to be set out by the International Longevity Centre thinktank as the industry tries to improve outcomes for people with small pension pots after the RDR.

Baroness Sally Greengross, who is chief executive at the thinktank, chaired a meeting last week with senior industry representatives to dis cuss the issue.

She says: “At the ILC, we are concerned that the retail distribution review could lead to a reduction in the availability of advice. We need to ensure that people with small pension pots do not lose access to advice altogether.”

Hargreaves Lansdown head of pensions research Tom McPhail says: “I do not think there should be a default at all. If people do not make an active decision to buy a pension, then their money should not go into a pension.”

Speaking at a Headlinemoney event in London this week, pensions minister Steve Webb said a joint annuity default was not being actively considered by the Government.

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A pension (and therefore an annuity) policy is held under a single name. Therefore any default must be written as a single life policy. It is only fair that this situation is altered on request.

The first commentator hit the nail on the head. The most useful default is advice must be taken.

While there is no question that RDR will prevent the majority of advisers from being able to profitably advising on annuity purchases, there are already many specialist advisers who provide cost-effective, targeted advice for retirees.

In the current austere times, it is essential that the government realise that they will be better off by facilitating indivduals access to these sort of services as better annuities mean less benefits being paid!

Why is it always Baroness so ‘n’ so, Lord such or Sir whatever ‘es called chairing and put in decision-making processes they patently don’t fully understand.
I’ll do it, with consideration AND experience, resulting in equitable outcomes instead of ill-thought-out dogma and endless ‘gravy-train’ committees all going about their business like a rudderless yacht in open water. (and no, I don’t have a yacht, but I do possess decency, reasonable insight AND EXPERIENCE)
PS So they admit the RDR is flawed – see if you can find an experienced IFA who hasn’t been saying this since the bastard RDR was born.

No default option will be the right one every time. So, if there is to be a default it is better that it is the one that pays THE MOST to the person who owns the annuity – single life ! That seems logical to me – would Steve Groves like to state his logic ? As for the Baroness sitting around with Senior Industry Executives to discuss the issue, it reminds me of the question “how many people does it take to change a lightbulb ?” – the answer depends on whether the people are working in some tax-payer funded quango. What is there to discuss ???

At the present time the annuity market for smaller funds is considered to be flawed. Baroness Comelately has now jumped on this bandwagon.
The question is whether any changes are going to make a material difference to this sector of the market. I’m not sure that the current crop of suggestions are going to help a great deal.
One of the central factors of human behaviour is inertia, which is why the poor quality roll-over annuity exists, and will continue to exist so long as the current rules exist. Ban roll-over and there would be have to be a change.
Taking IFA advice is not a practical universal option, and it does the IFA image no good to be perceived as being so grabby and greedy. Most low value funds will not be economical to advise upon. IFAs in general have sufficient work to keep up with FSA regulations, and seeing the occasional client in between time. Small pots will inevitably get even worse service in practice. Forget the rhetoric, think reality. And there will be fees involved.
Licence annuity providers and with the licence fee set up a default service, in a town with high employment, to deal with all people with total pension funds between £20,00 and £50,000. Below £20,000 take everything
as cash; over £50,000 proper advice is probably viable. In between have a cheap and cheerful set of options, based on an average of, say, the top five company rates. That part is easy.
Extracting the money from some providers is the difficult part. So make delays expensive. Fines of 100% of the fund – 50% to pensioner and 50% to administration, plus extraordinary fines for persistent offenders, with at least part arising from the personal income of the Directors – post tax.
The present system doesn’t work properly. Start thinking about the real problem. RDR is not the real problem, merely a factor.

YOU watch guys and gals, post RDR the consumer watchdogs will jump up and down at the ridiculous cost of IFA services and then what is going to change. One survey seems to think that an iFA can provide their services for a measly £38.40 per hour.

Plumbers dealing in the detritus of modern toilets charge double that and they do not have anyone looking over their shoulders 5,10,15+ years down the line saying they didn’t do it right.

I probably would be able to make a living on that rate, if every hour I spend on this job is client facing, but the amount of rubbish and regulations we have to deal with each and every week, takes away such earning power.

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